Question

Wetherby Paint Company manufactures polyurethane finish in a single production department. Production begins by blending various chemicals, initial cost, and ends by filling the containers. The containers are transferred to the shipping department. Labor and overhead are added continuously throughout the process. Management has determined that 2% of good units is normal spoilage. Spoilage is identified as soon as the chemicals are added. Total spoiled units for the period were 1,000. Factory overhead is applied at the rate of $3 per direct labor dollar.

Work-in-process inventory, May 1	Costs
Direct Materials - chemicals	$52,500
Direct Labor ($10 per hour)	8,500
May costs added:
Direct Materials	332,500
Direct Labor ($10 per hour)	38,500
	Units
Work-in-process inventory, May 1 (30% complete)	2,000
Transferred to Shipping Department	25,000
Work-in-Process Inventory, May 31	5.5000

a.        Cost of completed units for the month of December.

b.          Cost of units in process as of December 31

c.         Cost of units in ending inventory as of December 31

d.         How much costs savings is possible if Montoya operates at normal efficient operations?

e.          How does your answer change if the spoiled units are found at the end of the conversion process?.

f. Do in excel only must show all work.

Answer 1

A = 29,000
B = 28,750
C = 11.47
D = 5.36
Statement of Equivalent production
Particulars	Direct Materials	%completion	Equivalent material	Conversion	%completion	Equivalent Conversion	Total
Work-in-process inventory, May 1	2,000.00	0%	-	2,000.00	70%	1,400.00
Units started and completed =	23,500.00	100%	23,500.00	23,500.00	100%	23,500.00
Units transferred	25,500.00			25,500.00
Work-in-Process Inventory, May 31	5,500.00	100%	5,500.00	5,500.00	70%	3,850.00
Equivalent Units			29,000.00			28,750.00
Current Month Costs			332,500.00			154,000.00	486,500.00
Cost per Equivalent units			11.47			5.36	16.82
Note - Assumed materials are entered at the beginning of the process